Trade Talks With China Open in Washington, as Obstacles Abound

anastasios pallis

Top officials from the United States and China will sit down in the Eisenhower Executive Office Building on Wednesday for two days of face-to-face trade talks that could prove critical to the trajectory of the world economy.

Negotiations to end a monthslong trade war between the world’s two largest economies will be led by Robert Lighthizer, the United States trade representative, and Liu He, China’s vice premier. President Trump plans to meet with Mr. Liu at the conclusion of the talks on Thursday.

The countries are facing a March 2 deadline to reach a trade agreement — or the United States will raise tariffs on $200 billion of Chinese imports. But there is little chance that every issue will be resolved by that date, and Trump administration officials describe the negotiations as exponentially more complicated than anything the White House has tackled to date.

Here’s what to watch during this critical round of negotiations.

The Huawei Cloud

The talks come just two days after the Justice Department unveiled sweeping charges against Huawei, the Chinese telecom giant, and its chief financial officer, Meng Wanzhou. Huawei and Ms. Meng are accused of stealing trade secrets, obstructing a criminal investigation and evading American sanctions on Iran.

The timing could hardly come at a more awkward moment and it has raised questions about whether the Trump administration unveiled the charges to ratchet up pressure on China ahead of the talks. Ms. Meng was arrested in Canada last month, on the same night that President Trump and President Xi Jinping of China dined together at the G20 Summit in Buenos Aires where they agreed to a trade truce.

Treasury Secretary Steven Mnuchin, who will meet with Mr. Liu on Wednesday, said on Tuesday that the Huawei case was being handled on a separate track from the trade talks. But given China’s heated reaction to the arrest and indictment, it is hard to imagine that Chinese officials will not raise the issue.

“I think it’s very difficult to keep them separate,” said Weijian Shan, a Hong Kong-based private equity investor and author of “Out of the Gobi,” a memoir that depicts China’s modern history. “To the extent that China feels that this is a major issue with America, they will bring it up.”

Revamping China’s Economic Practices

China has demonstrated a willingness to address Mr. Trump’s concerns about America’s bilateral trade deficit with big purchases of goods and services, like chicken, soybeans and tractors. This is the easy part. More difficult is persuading China to overhaul its economic policies.

The Trump administration has been pushing China to scale back subsidies of state-owned enterprises, sharply open its markets to foreign investment and end its longstanding practice of forcing American companies to hand over trade secrets as a condition of doing business there. China has made a series of moves in the last month that suggest it is willing to accept some of these changes, but there is division within the Trump administration over whether these are merely symbolic — and empty — gestures.

“None of China’s domestic reforms since December have really addressed the structural issues in the relationship,” said Nick Marro, Asia and China analyst at The Economist Intelligence Unit. “Progress on increasing U.S. imports or tackling questions over China’s currency don’t really address what the U.S.T.R is really looking at, which are fundamental market access issues facing U.S. companies.”

The Art of the Contract

One of the biggest questions hanging over the trade talks is whether the United States can truly enforce any deal agreed to by Beijing.

Mr. Trump has wielded tariffs on $250 billion of Chinese goods as a stick to get Beijing to the bargaining table. But if the tariffs are lifted as part of a trade deal, there is no guarantee that China will live up to any commitments. American officials, who say China has broken promises in the past, have discussed mechanisms such as “snap-back” tariffs that would be reimposed if China does not follow through. Another option is “carousel” tariffs that would hit different swaths of Chinese products to prevent its economy from becoming immune to the pain of the duties.

China skeptics within the Trump administration fear that the Chinese will say anything to delay the increased tariff rates on March 2 and to get Mr. Trump to roll back the tariffs that are already in place. At that point they expect China to wait out the rest of his term and hope for a more dovish successor.

The Endgame

Trade deals tend to go down to the wire, so expectations are slim that the United States and China will reach a deal this week. More likely is that each country will release statements announcing progress and plans to continue talking.

Mr. Trump could see Mr. Xi in February if he travels to Asia for his next summit meeting with Kim Jong-un of North Korea. That would give them the opportunity to complete an agreement if the talks are on track.

Many observers expect that the two sides will make progress on a preliminary deal, most likely based on China’s making big purchases of American goods, and end up extending the March deadline to deal with the thornier issues.

The planned meeting between Mr. Trump and Mr. Liu will also offer an indication on the status of the negotiations, and analysts will be studying the president’s body language if the encounter takes place. And, of course, all eyes will be on Mr. Trump’s Twitter feed for progress reports.

This article is from NYT – go to source

Leave a Reply

Your email address will not be published. Required fields are marked *